Picture this: You have a pile of invoices and expense receipts that need to be recorded in your accounting software’s general ledger before the fiscal year ends.
You could hire contract or freelance workers to help speed up the data entry, but that’s going to be expensive, and you’ll also have to invest some time for training. One way to boost your financial data management would be to automate the process, but that sounds complicated—and expensive.
Automation technologies, such as robotic process automation (RPA), can help you transfer financial data from primary data sources such as emails and spreadsheets into your database with great accuracy and speed without the need to hire more employees.
And, RPA is a cost-effective alternative to more complex cognitive automation such as AI for managing financial processes. This data extraction technology can:
- Boost financial data accuracy by 95 percent.
- Increase cycle time to transfer financial data from invoices and receipts three to four times faster.
- Provide overall costs savings up to 80 percent.
Small business finance managers who assume automation is out of reach and continue to rely on manual data entry will ultimately pay a higher price for slower, less accurate reporting than those that effectively leverage robotic process automation.
In this article, we aim to help you understand RPA and its benefits, how you can apply it to your financial management processes, and key considerations before implementing the technology.
What is robotic process automation?
RPA is a software robot that replicates repetitive tasks normally carried out by a human. These robots are able to perform tasks within the graphical user interface (GUI) of your accounting tool at high speeds and with great accuracy for the following primary functions:
- Merging data into reports or templatized formats
- Transferring data from primary sources such as spreadsheets to analytics platforms such as a software’s database located on a server.
- Automating existing workflows to streamline repetitive tasks.
The “robot,” in the form of a software program, is mapped to a process or workflow by a software developer to perform each necessary task. The robot then completes the tasks one step at a time, for example, entering a customer’s profile data into text fields.
RPA differs from workflow automation tools such as macros, VBA scripts, and other script-based programs, which operate on the back end through an application programming interface (API).
In contrast, RPA workflow processes are controlled by software that mimics human input actions and only works on the front-end user interface (UI).
The two animations above highlight the differences between automation in script-based codes (left) and the user interface (right). RPA automates simple tasks that are performed in a user interface. (Source: Codevba and Solantech)
One key indicator of a shift toward RPA is that businesses are seeking to increase automation in their operations, and they’re budgeting more for automation technologies. Since AI and machine learning are still advanced concepts, small business finance managers can look to more cost-effective tools such as RPA.
The hype surrounding RPA began in mid 2016. Since then, RPA has been utilized across small business functions to increase productivity and ROI and save costs in CRM, sales, and other industries that rely on process-intensive tasks and high volumes of data entry work.
RPA is must-have technology for many small business finance managers who are tackling the burden of entering expense and invoice data from clients into their bookkeeping software.
Benefits of robotic process automation for small business accounting
Small business finance managers can reap tremendous benefits from RPA by automating labor-intensive financial work, such as invoice management.
Additional key benefits include:
- Reduced costs. By leveraging automation through RPA, small businesses stand to reduce processing costs up to 80 percent. RPA tools reduce staff requirements for bookkeeping and data entry tasks. Moreover, RPA tools can perform transactions more quickly than their human counterparts, and they free up workers from clerical tasks, so they can focus on more creative, analytical, or innovative projects.
- Improved documentation. RPA tools help you create robust financial audit trails, which ensures compliance and decreases business risks. With accurate audits of your financial processes, you’ll enhance the management of your tax records and cash flow. You also stand to increase financial statement earnings due to error-free reporting.
- Eliminates manual errors. RPA reduces keying errors, since data from invoices and receipts is directly transferred from PDF files and spreadsheets into a database, such as an invoice management tool or ledger entries in an accounting tool.
Key attributes of RPA that contribute to finance management
Before we delve into specific applications of RPA for small business accounting, let’s take a look at the key features RPA offers for financial management, and how it differs from other automation technologies.
Simple procedural tools. Unlike artificial intelligence (AI) and machine learning (ML), RPA tools do not learn and cannot be trained, so they lack “intelligence” in that sense. They are simple procedural tools that automate repeated tasks at high speeds with great efficiency and accuracy compared to a human. They do not have any analytical or cognitive capabilities.
Business integrations. RPA tools form the central integration core for primary and complex data platforms, when it comes to transferring data from one source to another. These tools can integrate with emails and spreadsheets, as well as applications on mainframes, client-servers, and the web. Moreover, RPA tools can be integrated with AI tools, internet of things (IoT), business process management (BPM) tools, and ERP systems to access data feeds.
Triggers. RPA tools can be triggered manually by a user, or they can run automatically on the server when the specified input data, e.g., client tax details, becomes available and needs to be populated in the database.
Deployability/platform. RPA tools can be installed on desktops and deployed on servers to access data feeds for performing repetitive tasks. You can also deploy multiple robots to execute different tasks within one process’s workflow when there is a high volume of data to process.
Data structure. RPA tools mainly process structured data in single transactions such as filling in form field details. The data must already be organized in a predefined way. Make sure you clean the text or use optical character recognition technology (OCR) to first read the data before processing it through RPA tools.
RPA promises significant ROI in 3 small business accounting functions
Small businesses generally tend to have unstructured financial data systems and processes which makes them inefficient in conducting critical financial functions such as bookkeeping, invoicing, and tax filing. These inefficiencies add to the costs, data keying errors, and improper auditing.
With RPA, small business finance managers can start to eliminate these inefficiencies by focusing on the following accounting functions:
1. Data collection from multiple sources
RPA software collects structured data from primary data sources such as emails and spreadsheets and automatically keys in these entries to a centralized general ledger.
These tools can also help in collecting operational and financial data from other sources in your small business such as your ERP and CRM, and combine and process this information offline before transferring them to a financial planning and analysis (FP&A) system.
2. Processing financial data for accounts payable
RPA software helps in processing financial data from different departments of your small business within a single general ledger (GL). Invoice data can be transferred from PDFs to an accounts payable systems.
3. Data validation and verification
RPA software can verify data during the order entry process and confirm customer credit details by validating them against the central database. The tool can also check vendors listed in the vendor master file, and add them if they’re not already on the list.
Understanding the implications of RPA for small business accounting
Based on the features and benefits mentioned above, it’s important for small business finance managers to understand the factors that can affect the implementation of RPA tools.
A SWOT (strengths, weaknesses, opportunities, and threats) analysis provides a very broad contextual overview of external and internal factors that affect a company. This type of analysis serves as a useful decision tool kit.
In this section, we’re providing an overview of RPA using the SWOT analysis methodology, presented in the graphic below to help small business finance managers make a quick assessment of RPA’s usefulness.
3 things you need to know before you start saving with RPA
As highlighted in the benefits above, RPA is a low cost and lightweight automation tool, compared to advanced enterprise resource planning (ERP) or artificial intelligence tools.
Here are some critical tips to follow to see the best possible ROI from using RPA for accounting functions:
Reconsider using RPA if you already have an advanced ERP, artificial intelligence, or analytics tools in place.
Most higher-end ERP financial suites have similar capabilities to RPA. They are already equipped to automate clerical tasks that involve transferring or processing large volumes of data from client email communications, voice calls, receipts, etc. and transferring invoice details or other financial information to the database.
Purchasing two different tools to perform similar tasks will lead to cost redundancies and raise the cost of your finance and accounting processes. In addition, two separate platforms may result in data discrepancies due to different approaches, thus lowering productivity when reporting and analyzing financial information.
Use RPA tools for mundane and repetitive accounting tasks that lack the need for emotional intelligence, reasoning, or judgment.
Employees can lose interest in repetitive tasks. They often seek more emotional and creative stimulation and are more engaged with tasks that involve analysis, such as reviewing a client’s full tax details to make assessments and recommendations. In addition, employees are capable of more creative or innovative tasks, which robots simply cannot do, while the robots can enter data with speed and accuracy that humans could never match.
Monotonous tasks increase the rate of errors that humans make while keying data. RPA can help you boost employee morale by implementing RPA tools in repetitive tasks while letting your employees focus on critical financial tasks that are more challenging and appealing.
Provide structured data inputs before RPA tools transfer it into a database.
RPA tools are strictly mapped to a workflow of just transferring data from a primary data source such as invoices and receipts to your accounts payable system. If you have any handwritten PDF invoices, you will need to process this data with optical recognition technology (OCR).
Failing to provide structured data inputs will lead to errors in the data reported by RPA tools after it’s processed further, leading to a loss of productivity. Make sure that whenever you map the workflow any RPA tool, it targets a structured data source with segmentation, i.e., data structured according to primary keys such as customer address, income, quarter, etc.
Next steps and additional resources
As a next step before you implement RPA in your accounting and financial management processes consider the following factors:
- Will there be a large enough cost savings in terms of hiring fewer employees and time savings due to faster transaction processing to justify the cost of implementing RPA?
- How will implementing RPA affect your current staffing and future hiring needs, as RPA will automate most data extraction functions?
- Are you already using an advanced data extraction tool that integrates to your ERP system? Will adopting dedicated RPA software make your ERP system redundant or vice versa?
Robotic process automation in small business finance and accounting is one of the most cost-effective ways of processing financial data at high speeds with greater accuracy and no data errors.
If you are looking for more ways to automate your accounting and financial processes, check out these GetApp resources:
- Read reviews, view screenshots, and learn more about accounting and financial management software on GetApp’s directory page.
- Choose from the top-rated accounting software featured in GetApp’s Accounting Software Category Leaders.
- Use our accounting software scorecard to choose accounting software based on your business requirements and budget.